AM Best Revises Outlooks to Negative for Forestry Mutual Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Forestry Mutual Insurance Company (FMIC) (Raleigh, NC).

The Credit Ratings (ratings) reflect FMIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The revised outlooks to negative from stable reflect deterioration in FMIC’s operating performance metrics over several years, primarily driven by above average claims severity within its workers’ compensation (WC) exposures in the wood products industry, particularly logging and sawmills. In addition, the company’s expense ratio is higher than average; however, this is reflective of FMIC’s considerable loss control practices, having 13 loss control field staff members composed of loss control engineers and safety trainers. In recent years, FMIC also has faced challenges such as rate adequacy, industry consolidation throughout the southeast and attracting new business. In response, management has taken corrective actions to diversify its book of business by expanding into lower-hazard classes of business, growing its agency force, increasing brand awareness and rate analysis and adjustments. Nonetheless, FMIC’s results currently trail the WC industry composite on a five-year average basis and continuation of this trend may lead to a revision in AM Best’s adequate operating performance assessment.

FMIC’s balance sheet strength assessment is supported by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), at year-end 2024. The company’s limited business profile reflects its position as a monoline WC writer for the logging, forestry and wood industries, which exposes it to risks associated with the timber industry, such as changes in demand for wood products, as well as dips and spikes in the construction industry. AM Best considers the company’s ERM framework and risk management capabilities to be appropriate for its risk profile as FMIC is recognized for its aggressive safety and loss control processes, along with a commitment to long-term stability for its members. This is in addition to a solid reinsurance program, with strong partners and manageable retention relative to its surplus.

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